Australia's next generation of submarines will be built in Adelaide in partnership with French company DCNS.
Prime Minister Malcolm Turnbull told reporters on Tuesday it was a "momentous national endeavour".
The recommendation of a competitive evaluation process and the experts who oversaw it, as well as the Department of Defence, was unequivocal.
The French offer represented the capabilities best able to meet Australia's unique needs, Mr Turnbull said.
"This is a great day for our navy, a great day for Australia's 21st century economy, a great day for the jobs of the future."
The project is expected to generate 2800 Australian jobs.
"The submarine project alone will see Australian workers building Australian submarines with Australian steel, here where we stand today," Mr Turnbull said.
Advanced manufacturing technology and skills were key to Australia's economic future, he said.
Defence Minister Marise Payne said the submarines were necessary for Australia's national security.
"It reflects the fact that we are a maritime-based trading nation and both our national and economic security are linked to the maritime environment of our region," she said.
